Former Sen. George Mitchell and his law firm have offered to withdraw as mediator in talks over how much Pacific Gas and Electric Co. should be fined for the San Bruno pipeline explosion after the city and consumer watchdog groups voiced their opposition, officials said Thursday.

San Bruno and San Francisco officials, joined by advocates for PG&E customers, had denounced the California Public Utilities Commission's "unilateral" selection of Mitchell's law firm, DLA Piper, to broker a deal over regulatory penalties for the September 2010 disaster. City officials and consumer groups said the law firm represents an insurance carrier for PG&E, which they called a conflict of interest.

"Sen. Mitchell did the right thing by telling the parties that he wouldn't mediate without all the parties agreeing," said San Bruno City Manager Connie Jackson, who is involved in the talks. "We are very pleased and looking forward getting back to direct negotiations with PG&E."

Tom Long, who is involved in the talks for the consumer group The Utility Reform Network, said, "It appears that Sen. Mitchell and his firm, DLA Piper, made a wise decision."

Jackson and Long said utilities commission officials had told them that they would convey their continued opposition to DLA Piper, thus making the firm's withdrawal official.

PG&E and utilities commission officials had no comment about the withdrawal offer, and DLA Piper did not respond to calls seeking comment. Todd Burke, spokesman for the utility, said PG&E will continue to take part in the talks, regardless of whether there is a mediator.

The negotiations have stalled over how much PG&E should be fined for the explosion, which killed eight people, as well as for events leading up to it and the utility's poor natural-gas system record-keeping. PG&E has said it expects to be fined around $200 million, but other parties are believed to be holding out for as much as $2.5 billion.

Mitchell's appointment came as a shock to the cities and consumer groups because mediators are typically selected with the agreement of all the parties involved. The parties said that although they respect Mitchell, who served as mediator in talks over Northern Ireland, the utilities commission's leadership had bungled his appointment by not consulting them.